In the lung, several enzyme systems including monooxygenase activity have been found to be localized within discrete cell populations. Consequently, several pulmonary toxins are particularly damaging to select cell-types. In order to study where toxic reduced oxygen species such as superoxide or hydrogen peroxide are produced within the lung, a histochemical technique utilizing the heavy metal, cerium, has been investigated. Cerium reacts with superoxide/hydrogen peroxide to produce a precipitate that can be readily visualized by electron microscopy. The technique has been applied mainly in rat lung slices, isolated perfused rat lung and isolated rat lung cells to investigate localized production of hydrogen peroxide. Extensive studies using Ce/H2O2 in the presence of a range of antioxidant enzymes and superoxide traps were undertaken in order to characterize the interaction of cerium with reduced oxygen. The rate of this reaction was biphasic, pH-dependent and inhibited by ascorbic acid, superoxide dismutase and albumin but not by ethanol or mannitol. In rat lung slices, cerium-derived electron dense bodies were seen principally around the alveolar type II cells. These bodies were diminished in the presence of catalase but superoxide dismutase produced no apparent effect. Spectral X-ray microanalysis confirmed the presence of cerium and also indicated the presence of phosphorus suggesting that at least some of the electron-dense staining arose from the presence of inorganic phosphorus. No cerium was detected on membranes of alveolar type I or endothelial cells, or in the cytoplasm and nucleus of the alveolar type II cells. The exact cause of the highly localized precipitation of cerium around the type II cells is presently unknown.